Part 1. Financial Ratios

Please compute the 6 ratios requested below for the Smith Company as of and for the year ended December 31, 2020. Please refer to Illustration 5A.1 on pages 5-31 and 5-32 of our textbook for a summary of financial ratios and formulas. Compute each ratio to 2 decimal places using excel rounding.

The 6 ratios you should compute are:

• Current ratio
• Accounts receivable turnover
• Inventory turnover
• Profit margin on sales
• Earnings per share
• Debt to assets ratio

Compute the 6 ratios using the following data:

Current assets $18,000,000

Current liabilities $10,450,000

Net sales $77,000,000

Accounts receivable beginning of year $ 4,850,000

Accounts receivable end of year $ 6,125,000

Cost of goods sold $50,750,000

Inventory beginning of year $ 5,800,000

Inventory end of year $ 6,500,000

Net income $ 3,900,000

Preferred dividends $ 225,000

Weighted-average common shares outstding 500,000

Total liabilities $15,100,000

Total assets $46,400,000